Venezuelan Banking System Dollarization Process

Venezuelan Banking System Dollarization Process

By Juan Molina | Juan Molina | 20 Nov 2020

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In this article, I will talk about the "Venezuelan Banking System Dollarization Process".

For this, I will analyze the initiative taken by the National Executive through the Central Bank of Venezuela (BCV), where it is proposed to establish a compensation and settlement system based on American currency.

For approximately 6 months, five private banking entities have offered Venezuelans the opportunity to open an account in Dollars. This was a great surprise since 20 years ago an exchange control was established in Venezuela that gave the State the exclusivity of the management of foreign currencies.

This measure seriously affected private imports and created a great source of corruption due to the exchange rate of preferential rates, which, added to a brutal bureaucracy, allowed the illicit enrichment of many government representatives. But this is another matter entirely.

These private banks in Venezuela, which offer services to their clients with dollars, so far only allow cash deposits, withdrawals, and transfers between accounts of the same bank.

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November 16, 2020

On this date, according to information provided by the portal Bloomberg, the BCV has met with these banking entities with the intention of developing the mechanisms to create and establish a clearing and settlement system based on American currency.

Within this system, the Central Bank of Venezuela (BCV) would function as a "dollar clearinghouse" thus creating a bottleneck that would centralize the management and distribution of foreign currency.

The only positive aspect that we could find in this process would be that it would allow (In theory) to formalize transactions in dollars within the Venezuelan banking system.
With this, interbank transfers and the issuance of financial credits would be possible.

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Venezuelans are experiencing a process of dollarization of the economy, which has been developing informally for more than three years, although in the last semester of 2020 it has been accentuated to the point that daily transactions such as food purchases, or the cost payment of a taxi are being made with the use of physical dollars.

The national currency "EL BOLIVAR" is practically out of circulation. After three reconversions and the issuance of five monetary cones, the value of the Bolivar was pulverized.

The highest denomination banknote that is in circulation (50,000.00 Bs), does not reach the value of a piece of bread.

This process of dollarization of the national banking system should provide greater stability to the economy, which should have a positive impact on the well-being of Venezuelans.

When we reflect on the fact that, it will be the central bank (BCV) that will govern the operation of this system, we can only feel mistrust.
The government of Venezuela is recognized in the world for its high levels of corruption, for this reason investors should feel great fear of placing their dollars in the hands of unscrupulous people who could seize all that capital or apply commissions or speculative clauses that would undermine the financial power.

Please don't forget to see this post on my Steemit's blog:



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Juan Molina
Juan Molina

I'm passionate about everything related to Crypto and Blockchain

Juan Molina
Juan Molina

I'm passionate about everything related to Crypto and Blockchain

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